TCS Capital Markets Forum | Natan Tiefenbrun Staying flexible
Natan Tiefenbrun, CEO, Turquoise looks at the changing regulatory landscape through an equities specific lens.
“Regulation should look to encourage competition as a promoter of fairness and transparency in the market.”
Having recently taken up the role of CEO at Turquoise I have found I am engaging much more closely with the Financial Services Authority than I previously have done in my career. We have to respond to the changing regulatory environment and will continue to do so to ensure that we are providing a competitive offering to our customers. According to a Bank for International Settlements (BIS) report in 2011 there are approximately $800 billion of OTC swaps and forward on equities and a further $1.9 billion in OTC options in Europe alone. This is a huge amount of OTC equity related trades that are being pushed towards central clearing by regulation. For capital market operators including Turquoise and the wider London Stock Exchange Group (LSEG), impending regulation is not just about new requirements we will have to meet, but the
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opportunities that will arise. You can see that there is going to be a race amongst CCPs (central counterparties) and trading platforms to declare a capacity to trade or clear a certain product. We believe the proposed deal with LCH is a transformative one for LSEG, pioneering an open-access, horizontal model in partnership with customers. In a regulatory environment that demands flexibility, aligning with customers and offering them choice and manoeuvrability within our infrastructure is crucial. In terms of regulatory change that could help bring positive change to the market, we would really like to see some progress on the access articles contained in MiFID II proposals, articles 28, 29 and 30. There are two key elements that could make the European derivatives market more competitive and help grow volumes. The first is the right of venues to access the CCP of their choice. For example, I may have invented the best instrument ever but unless I can clear it in a CCP where it can benefit from margin offset against other correlated products then I am offering this fabulous product but it is inefficient from a capital standpoint.
The second is that established industry benchmarks should be licensed on a fair and non- discriminatory basis. We don’t expect this to be done for free and the value of intellectual property should be protected, but fundamentally if the FTSE 100 or the Eurostoxx 50 is widely understood to be an industry benchmark then these indices should be available for other venues to license. Regulation should look to encourage competition as a promoter of fairness and transparency in the market and these regulatory changes could make a big difference in achieving that. ■
Best Execution | Spring 2013
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